Branson's flights of fancy: The highs and lows of Virgin Atlantic

Twenty-five years ago, Virgin Atlantic was born, offering travellers new levels of style and sophistication. But have the skies darkened for this iconic brand? Simon Calder meets the mogul with a mission

"Amanda!" Last Sunday afternoon, the UK's most recognisable female celebrity was arguably the Britain's Got Talent judge, Amanda Holden. The previous evening, her programme had attracted nearly 19m viewers.

Click below to listen to the podcast of Simon Calder's interview with Richard Branson

How do you follow that? By flying to New York. Any one of five airlines could have taken her across; Heathrow to JFK is the busiest intercontinental air route in the world. But Ms Holden chose the airline designed to appeal to travellers who believe flying should still have elements of glamour.

Yet 25 years ago Virgin Atlantic had still to take to the skies; its maiden flight took off from Gatwick to Newark, New Jersey, on 22 June 1984. The talented music mogul, Richard Branson, leased a second-hand Boeing 747, started selling tickets through Virgin record stores, and began to transform travel as he had music retailing.

A quarter-century on, Ms Holden arrived at the airline's Upper Class Wing at Heathrow. This facility, tucked out of sight from ordinary travellers, is the closest approximation to a private-jet terminal for anyone flying on a scheduled airline. As she stepped from her limousine, she bumped into Virgin Atlantic's founder and president, Sir Richard Branson. He greeted her, they hugged, and she disappeared to the closest approximation to bliss at Heathrow: the Virgin Clubhouse.

Then the music entrepreneur-turned-airline tycoon sat down to talk about the airline that Richard built. Has Virgin got talent? And what did Branson ever do for us?

Sir Richard Branson: Try to remember what travel was like 25 years ago; it was the reason I went into the airline business. You would sit on a British Airways plane – or a TWA or a Pan Am plane – and you would get dreadful food, you would have to deal with staff who never smiled, you had no entertainment, you had uncomfortable seats ... you were treated like cattle, and it was thoroughly unpleasant.

I think that the advent of Virgin Atlantic shook up all of that. For instance, we introduced a first-class product, but at business-class fares, which transformed the comfort of travelling for business travellers, and things like stand-up bars where they could actually get up and not be stuck in their seats.

We introduced seat-back videos for all passengers some years before everybody else.

We introduced a premium economy cabin – a much bigger cabin for economy-class passengers who could afford to pay a little bit more – and other airlines have followed.

We started a system of taking your loose change off you to give to charity and most other airlines have followed suit, and literally hundreds of millions have been raised as a result. So, as far as air travel is concerned, we have transformed it, and also, to be honest, I think that we've done the same to train travel.

Simon Calder: The strange thing is that Germany, France, Italy, Spain – all the big European countries – are perfectly happy to have one single flag carrier. Why do we need, in the UK, to have two world-class long-haul airlines in Virgin Atlantic and BA?

RB: I don't think they know what they're missing. Competition is good for people. If you don't have competition, you end up paying higher fares, you end up with the management thinking: "Do we really need a stand-up bar in the plane? Do we really need to give limousines to and from the planes and the expense that goes with it? Do we really need to spend money improving our economy-class or business-class seats?"

So I think that Britain is fortunate that it has not just two long-haul carriers, it also has quite a few short-haul carriers that have transformed air travel for the travelling public in the UK. I think it's extremely important that the competition authorities remember that, and don't allow "monster monopolies" to be created in the form of, for instance, British Airways and American Airlines being allowed to merge.

SC: Isn't it time that Virgin, after many years of protesting the iniquities of such a tie-up, just said, "Well if we can't beat them, then we're just going to join them and become a significant player in the Star Alliance?" After all, Singapore Airlines, your 49 per cent shareholder, is already a very effective member of that alliance: you'd have all sorts of synergies with Lufthansa, with BMI – part of one great team.

RB: Well, it sounds very nice, but what the competition authorities and the public need to remember is that BA and American together will control something like 65-70 per cent of the market on some of the major routes between Heathrow and America. I'm honestly not sure that other airlines would survive against it. [Travel agents and corporations] will be forced to recommend to people to travel with BA and American Airlines over, say, Virgin Atlantic or BMI, just because of their clout, not because they are better airlines. Twice we've been to the competition authority and we've won. This is the third time BA and American Airlines have tried. They will use the bad economic climate to try to push this through, but the bad economic climate will only last another year or two. This is exactly the time that competition authorities have got to stand up to them.

SC: I was just checking out fares this morning: if I flew from London to New York with Virgin Atlantic on 22 June this year, I would be paying in the low £300s for a return to New York, which is what you were charging for the maiden flight in 1984. Since then, one or two costs have increased, to say the least. It's a miserable time to be running any kind of operation when even in peak season you can only persuade people to part with just over £300 to get to America and back, isn't it?

RB: It's a tremendous time for the travelling public. We're offering fares to try to stimulate air travel, so at least we can go out with 100 percent of our seats full, with a happy, smiling public who actually need to have reduced fares. Yes, it's unlikely that we're going to make money like we did last year in the airline business, but airlines do go through these troughs and Virgin Atlantic fortunately has had more good years than bad years and we've managed to build up cash reserves so we can see ourselves through the next couple of lean years and be in a good position when we come out of this horrendous recession.u oSC: Looking back at some of the shocks which have hit Virgin Atlantic – the Iraq war, the "dirty tricks" campaign [in which British Airways staff delved into the Virgin reservations system in a bid to poach passengers], 9/11, SARS – when have you felt that things were closest to the edge?

RB: We've had moments over the years where we've come close. After our inaugural flight 25 years ago, I came back to find the bank manager sitting on my doorstep, telling me he was going to bounce my cheques on the Monday, so that was quite early on in the whole process.

Fortunately over the years the Virgin brand's got stronger: the other non-airline businesses have got stronger, our reputation's got stronger, and we're now in a position where as long as the playing field is not tilted ridiculously by the competition authorities allowing mad mergers to take place, we will survive and thrive for the next 25 years. If the competition authorities tip the playing field such that almost any airline will not be able to survive against American and British Airways, then obviously we'll do our absolute best, but we're going to be doing it with our hands tied behind our backs.

SC: Meanwhile, British Airways is, according to its in-house journal, in a "fight for survival", and is doing its best to come after you: launching flights to places like Montego Bay, cutting New York flights and going to more leisure destinations, which have been traditionally Virgin territory. Are they trying to see you off?

RB: British Airways have tried to see us off almost every year for the last 25 years. Some years they've done it in illegal ways, some years they've done it in fair ways; but as I say, as long as there's a fair playing field, as long as we can keep our quality up to the level we have, there's room for both of us and we'll both ultimately do fine.

I think their headline "fight for survival" is also perhaps aimed at the competition authorities as much as anything else. I can't imagine them doing a headline like that if it wasn't for the BA-AA merger, which they're trying to get through. They're using the same tactics that the car companies have used in America – and the insurance companies in America – to try to get governments to be sympathetic to them.

What people need to remember is that BA is not owned by the public: it's a large private company and it should be treated as such. They should stand on their own two feet on a fair playing field going forward. People should read between the lines when they do headlines like that.

SC: You are now in the position, starting this year, of being able to fly me all the way round the world; down to Sydney, across from there to Los Angeles with V Australia, across the US on Virgin America, and back home on Virgin Atlantic. Is this a time for any optimism about the future expansion of the Virgin brand, or of your aviation interests into other parts of the world?

RB: Yes – we're involved in airlines in different parts of the world. Virgin America is a domestic airline, and finally America has a really good, decent domestic airline in Virgin America. That is expanding and growing throughout the States, and I think will become a major force in America. Again, because it's the best airline in America, it will, I think, go from strength to strength.

We've now connected Los Angeles up with Sydney, with Brisbane, with Melbourne. From there we'll start routes going to Johannesburg from Australia as well, so if people want to go the whole way round the world, they can either go via South Africa or they can go via Hong Kong.

Step by step, Virgin is growing in different continents.

SC: You started with a second-hand Boeing 747. We are right next to a model of a Boeing 787 Dreamliner, named Dream Girl and still very much a dream because the old girl has yet to take off. What will it mean for travellers when, finally, the 787 comes into service?

RB: We, through Steve Fossett [the late aviator], have pioneered planes that were made of composite materials which were very light. We proved that a plane could fly right around the world on a very small amount of fuel. We used that to lobby Boeing and Airbus to get a lot more composite materials in their planes

The 787 is a very light plane, it's a large plane, it can carry a lot of passengers, burn a lot less fuel, it would be good for the environment (if a plane can be good for the environment), better for the environment than the current planes. It's a much more economic plane to operate. It's just very sad that Boeing are having so many problems getting the job finished. It's enormously frustrating for us, it's enormously frustrating for other airlines, so we'll just cross our fingers that they can hurry up and get the job done.

SC: What are you proudest of in the 25 years of Virgin Atlantic?

RB: It's the sort of thing that bosses will glibly say and not necessarily mean, but all I can say is, with 100 per cent conviction, the thing I'm most proud of is our staff. I remember sitting on Virgin Atlantic, 25 years ago: the smiles on people's faces, the spirit of camaraderie was fantastic. We only had 200 staff then; when we got to 10,000 we still had that same spirit. And 25 years on, when you get on a Virgin Atlantic plane, you've got the same smiles, the same commitment from the staff to look after the passengers, the same fun that they had 25 years ago.

Virgin territory?

Travel industry figures give their views on 25 years of Virgin Atlantic...

Sarah Miller, editor of Condé Nast Traveller

"Of all the airline brands in the world that cross the Pond, Virgin Atlantic was the first to realise that a transatlantic flight was more than a means of transporting passengers to a sexy city such as New York. Virgin transformed the idea of a journey – from lounge, through inflight, to landing – into a glamorous experience.

"The company reinvented and modernised the original glamour of flying by creating a hotel experience in the air. And even more cleverly didn't do this through elitism but in replacing First Class with Upper Class proved themselves more accessible.

"Constantly innovating, always ahead of the curve, Virgin Atlantic may have started as a one plane, one-stop airline in 1984 but over 60 million people have flown under its red and white livery since. It's a clever early bird that always catches the mood of the moment.

Willie Walsh, chief executive of British Airways

"Twenty-five years ago, Virgin brought more competition to London's long-haul air market. Today Virgin is a big player and part of the airline establishment. Consumers benefit from competition between all of the big airlines. British Airways is trying to bring more competition to the whole market between the EU and the US, so that consumers can benefit again. Of the 42 airlines in that market, Virgin is the only one objecting to our plan [to cooperate with American Airlines in schedules and fares]. Have times changed, or just Branson's interests?"

Mark Tanzer, Abta chief executive

"Richard Branson has been a pioneer in making long haul travel accessible for all, but he has never lost sight of the importance of travellers' aspirations. Virgin Atlantic has helped both to revolutionise the travel industry and to raise the bar."

Plane to see: 25 years in the life of Virgin Atlantic

1984: on 22 June, Virgin Atlantic's only Boeing 747 takes off from Gatwick, destination Newark, New Jersey. Business-class passengers benefit from two innovations: a free limousine at each end of the journey, and a free economy ticket for future travel. A plan by Richard Branson to call economy class "Riff Raff" is narrowly averted. The inflight entertainment includes a live performance by Julian Lloyd Webber.

1986: Virgin Atlantic adds a second Boeing 747 and starts flying from Gatwick to Miami.

1989: to fill seats and celebrate the New Year, London-New York fares diminish to £89 outbound, $89 inbound – around £145 return at prevailing exchange rates. Later that year, flights begin to Tokyo with a refuelling stop in Moscow.

1991: the Conservative government abolishes the "London Air Traffic Distribution Rules", opening the way for Virgin to fly from Heathrow. The airline currently flies to 17 destinations from Heathrow (where it holds around 3 per cent of slots), to nine from Gatwick and to three from Manchester.

1992: Rich-ard Branson sells Virgin Music to Thorn EMI to plough the proceeds into Virgin Atlantic. The airline launches a premium-economy cabin, Mid Class, which is soon rebranded as Premium Economy. It starts flying from Gatwick to Orlando; Virgin Holidays is today the biggest tour operator to Florida.

1993: in what is believed to be the lowest such fare ever offered, Virgin sells through agents an "open-jaw" Heathrow-Los Angeles and New York-Heathrow ticket for £179, representing around 9,000 miles of air travel at a rate of 2p per mile.

1997: British Airways abandons the Union flag on its tailplanes; Virgin responds by applying the design to its planes, and claiming to be the UK's flag carrier. On 5 November 1997, the main undercarriage of an Airbus A340 fails and the aircraft makes an emergency landing at Heathrow; two crew members and five passengers are slightly hurt during the evacuation.

1999: A busy December – Singapore Airlines spends £600m on a 49 per cent slice of Virgin Atlantic, and Richard Branson is knighted in the New Year's Honours.

2001: In the wake of the attacks of 11 September, Virgin Atlantic abandons its recently established routes to Toronto and Chicago.

2005: Virgin Nigeria starts flying between Heathrow and Lagos; this route has since been abandoned.

2006: Virgin Atlantic tells US and UK competition authorities of alleged price-fixing between itself and British Airways on fuel surcharges. The two airlines later pay into a fund (airpassengerrefund.co.uk) to compensate passengers who bought tickets between 11 August 2004 and 23 March 2006.

2007: Virgin Atlantic orders 15 Boeing 787 "Dreamliners", though the aircraft launch schedule is delayed; it has yet to fly.

2009: In February, Branson's latest venture, V Australia, starts flying between Sydney and Los Angeles; travellers can now circumnavigate the world on Sir Richard's airlines. In May, Virgin Atlantic announces increased profits, but chief executive Steve Ridgway warns the industry is facing "The toughest trading environment ever".